Most people today at least have heard about forex trading. It is a very
exciting and potentially profitable business that most people are trying their
hands on. However, not everyone excels in the business. The major reason for
this is because not many people understand the statistics in the business and so
they do not know when it is best to trade. It is important to understand the
concepts better.
Trade Balance
In business or in a country, there are
exports and imports. The difference between the imports and the exports of
tangible goods or even services is what is referred to as trade balance. If you
are interested in foreign exchange, you must know this balance because it is
actually the major indicator here.
The economic activity of an economy is
indicated with this balance. It will actually help you make the right decisions
as to whether it is worth engaging in foreign exchange at a particular time or
not.
Consumer Price Index [CPI]There is a fixed price of consumer goods
and services. This is what is usually averaged to end up with the CPI. The
report is usually issued on a monthly basis. It is this report that is usually
used to determine the rate of inflation of the goods and services for consumers.
It is an important statistic to understand since the economic activity
usually takes into account consumer spending. However, the prices of more
volatile items like food and energy are usually excluded here. So, when the CPI
is high, there is usually an expectation of short term higher interest rate and
this would support the currency.
Producer Price Index [PPI] This is the same
description as that of CPI just that it relates to producers or manufacturers.
It indicates commodity inflation. It accounts for price changes within the
manufacturing sector.
When it is high, there will be high prices on consumer
goods and this would mean that the interest rates would also go high. With prior
knowledge of this, you can be prepared so that you are not surprised with the
commodity prices.
Gross Domestic Product [GDP]
At least most people
understand this statistic. It is usually issued quarterly and it reflects the
widest measure of economic activity. When it is high, there are usually high
interest rates unless the increased inflation pressure is concurrently
undermining currency confidence.
Payroll Employment [PE] The government
and sometimes businesses usually employ people and pay them monthly. The total
number of people who belong to these two payroll types is what is referred to
here. So, PE is one of the primary monthly indicators of economic activity
because all the major sectors of the economy are involved.
When the PE is
high, the economic activity is strong and this means that the interest rates
would go high and the currency would probably be supported.
Durable Goods Orders [GDO]
All new orders that are placed by domestic manufacturers either
for future or even immediate hard goods are tracked. This sum is what is
referred to as GDO. It is calculated monthly. It is accurate because usually
most productions are done when an order for the commodities are placed.
Defense and transportation orders are considered to be highly volatile and
so are not included in the report. When it is high it means that the currency is
supported as the interest will shoot.
Retail SalesThe receipts from
retail stores are also measured and this helps define consumer spending. Half of
total consumer spending and third of aggregate economic activity is involved.
Housing StartsThe number of residential units construction per month.
It assesses the commitment of builders to new constructions and when the figure
is high it means that the economic activity and confidence is equally high.
It is best to trade when the economic activity is high. So, watch out the
statistics and see when the right time has come.
About the Author
Having
the right description of the statistics involved in forex trading will help you get into the
business with confidence. The forex
statistics are usually available even online.
